Budget

Return to Common Sense

November 5, 2016

Section:Domestic - Budget

“The ever
expanding budget reflects entitlements on autopilot to bankruptcy, monies for
redistribution back to states, and new unfunded programs added every year which
will require more than doubling marginal tax rates causing more damage than
good to address these shortfalls.”

“The nearest
thing to eternal life we will ever see on this earth is a government
program.”
Ronald Reagan.

Philosophy
(Background, Issues, Objectives):

The Congressional Budget Act of 1974 created the Office of
Management and Budget (OMB) to prepare projections of federal spending
"based on the continuation of the existing level of government
services."

·In 1985, the Deficit Control Act
ensured that spending would be adjusted to keep pace with inflation.

·The Congressional
Budget Office (CBO) uses the "current services baseline" and
automatically increases the budgets of existing federal agencies every year
even if Congress and the Senate do nothing.

The budget process is defined,
established by the Budget and Accounting Act of 1921, the Congressional Budget
and Impoundment Control Act of 1974, and other budget legislation.

·A
budget is commonly seen as an instrument of determining how much to spend, how
to allocate limited resources, and how to raise sufficient financing.

·The
Office of Management and Budget (OMB) prepares a projection of federal spending
for the upcoming fiscal year, based on a continuation of the existing level of
governmental services.

·The
Congressional Budget Office (CBO) then prepares a five year projection of
budget authority, outlays, and revenues, and identify
the resulting surplus or deficit.

·The
President must submit a budget to Congress each year by the first Monday in
February.

·Each
year in March, the CBO publishes an analysis of the President's budget
proposals.

·The
House and Senate Budget Committees each submit a budget resolution by April 1.

·Appropriations
committees then put together appropriations bills, considered in the House
after May 15.

·Once
appropriations committees pass their bills, they are considered by the House
and Senate, with a conference committee is typically required to resolve
differences between House and Senate bills.

·Once
a conference bill has passed both chambers of Congress, it is sent to the
President, who may sign the bill or veto.

·Congress
has not passed all of the appropriations bills before the start of the fiscal
year, so Congress then enacted continuing resolutions to provide for the
temporary funding of government operations.

oIn
2012, there are twelve appropriations bills which need to be passed:

§Agriculture,
Rural Development, and Food and Drug Administration.

§Commerce,
Justice, and Science.

§Defense.

§Energy
and Water Development.

§Financial
Services and General Government (includes judicial branch, the Executive Office
of the President, and District of Columbia appropriations).

§Homeland
Security.

§Interior
and Environment.

§Labor,
Health and Human Services, and Education.

§Legislative
Branch.

§Military
Construction and Veterans Affairs.

§State
and Foreign Operations.

§Transportation
and Housing and Urban Development.

oMultiple
bills are sometimes combined into one piece of legislation, such as the Omnibus
Appropriations Act, 2009.

The Office of Management and Budget reports to the White House and
is responsible for the creation and performance of the annual budget.

oThe Office of Management and Budget has the mission
to oversee agency and regulation performance, but operates on a voluntary basis
encouraging use.

oDuplication and waste are not examined since it
might require downsizing of individual departments and agencies.

The federal government produces a budget
each year that would not pass a public audit.

The Federal Financial
Management Improvement Act of 1996 required the publication of
consolidated financial statements using generally accepted accounting
principles (GAAP), and the GAO provide an opinion on their condition.

The Office of
Management and Budget publishes the budget.

oThe totals for the current and upcoming fiscal
years are only projected amounts.

oUnfunded liabilities such as Medicare, Social
Security, and Fannie Mae and Freddie Mac are not included in the budget
numbers.

The Government Accountability Office (GAO) oversees the use of
public funds.

oEstablish accounting standards for the federal government

oConduct audits of internal controls and financial management.

oConduct program evaluations and analyses of a broad range of federal activities.

·In 2010 for the 14th year in a row, the U.S. Government was unable to express an opinion on the consolidated financial statements because of control weaknesses and other limitations.

The federal budget includes a staggering 1,804
subsidy programs,
including grants, loans, insurance, scholarships, and other benefits.

·The growth in the number of subsidy programs
illustrates the government’s increasing disregard for federalism (the
constitutional principle that the federal government ought not to encroach on
state, local, and private activities).

·State governments are becoming little more than
regional divisions of the national government and nonprofit groups and
businesses are becoming tools of the state.

In 2006 there were 814 federal grant programs for state and local
governments.

Government has built and continues to mismanage
several major infrastructure programs:

Government
enterprises compete with private alternatives, but are paid for by public
funds.

Inter-state wealth redistribution is not
a valid purpose for any program.

If States need
money, they can tax their residents directly.

Recommendations:

Short
Term, Reform federal budget process:

Limit federal government spending to no more
than 20% of GDP.

Require balanced budget within ten years, then
annually.

oInstitute biennial budgeting and
appropriations to restore order to the spending process.

oEnact long term budgets and review at
least every five years with triggers or action-forcing devices that
automatically make changes when spending exceeds budgeted amounts.

oDeliver annual report to American citizens of the
country’s financial condition.

Comply with GASB 45 to establish an accrual accounting approach to
report the cost of benefit as an expense during the years in which the
employee is working.

oInclude State Children’s Health Insurance
Program (SCHIP) as separate line item.

Isolate Social Security, Medicare and Medicaid as a separate part
of the total budget converting them into regular “discretionary” programs.

Require the President
and the Congress to jointly estimate the amount of revenue they expect
will be available as well as the fiscal year's
actuarially accrued "non-discretionary" expenses.

oAppropriate
truly "non-discretionary" obligations, like Social Security and
Medicare, as the first task.

oIf
appropriations tasks from the previous year have not been completed, no new
appropriations should be allowed to ensure that accounting estimates are based
on complete and truthful information.

Include a provision of
actuarially prudent reserves for any federal insurance programs or
guarantees now in existence or provided at the time Congress creates them
in the future.

oRequire
explicit, current recognition of the future costs for such specialized programs
as flood and crop insurance, Export-Import guarantees, and prospective bailouts
at the time they are granted rather than the time they are likely to be paid.

Recognize mandates and
their enabling regulations as the responsibility of the federal government
and charged to the federal budget.

Include a
complete and objective cost benefit analysis in any healthcare
regulations.

Require
adherence to strict rules for use of “emergency” spending.

GAO should
conduct an annual study of duplication in federal spending.

OMB should
subject all major regulations to a benefit-cost analysis before being
implemented.

oExpectMore.Gov developed to monitor
program effectiveness.

oCalculate
benefits for all new programs, not just “major” (estimated economic
impact greater than $100 million; less than 1% of all programs) programs.

oReduce
regulation compliance burden.

Resurrect the “Byrd
Committee,” the Joint Committee on Reduction of Nonessential
Federal Expenditures, with subpoena powers to focus on making rescissions
in federal spending and requiring an up-and-down vote on the floor.

oTerminate programs and regulations that are
ineffective or inefficient

Authorize a Presidential line item veto authority to limit
“earmark” and “pork” projects.

Provide a searchable website showing spending from the Office of
Management and Budget.

“Privatizing
Fannie, Freddie Could ‘Mitigate’ Risks Caused by Government
Intervention, Says GAO” by Matt Cover dated September 15, 2009
published by Cybercast News Service at http://www.cnsnews.com/news/article/54021 .

“Taking
the Government Out of Housing Finance: Principles for Reforming the Housing
Finance Market” by Peter J. Wallison,
Edward Pinto, and Alex J. Pollock dated March 24, 2011 published by American
Enterprise Institute at http://www.aei.org/paper/100206
.